Richard Cayne at Meyer International in Bangkok Thailand comments that it was a strong week for equities globally, especially within Europe. There are further hints of quantitative easing (QE) and a modest improvement in economic data, European equities rose by around 3% during the week. Elsewhere, the US and UK also performed well up around 1.5% meanwhile Asia was flat. A major driver for this has been the extensive drop in the price of crude oil and expectations that this will lead to improvement in terms of economic data. Crude oil is now trading below $80 per barrel, down 30% in the last few months. An OPEC meeting will take place this Thursday in Vienna, but there is expectation that we are unlikely to see a significant cut in crude production notes Richard Cayne. It is worth thinking about the transition mechanism regarding how that feeds into the underlying economy. In the US gasoline prices at around $3 per gallon, is down from over $4 per gallon earlier in the year. This is having a significant impact which is effectively a tax cut for the US consumer explains Richard Cayne Meyer. Presumably, over the following months, that will start filtering through into US economic data. But it is not all good news: concerns are beginning to creep in at the corporate level, particularly amongst shale producers, where the cost of production is now probably higher than the current levels of crude oil. Those companies are effectively operating at a loss, which is unsustainable over the long term notes Richard Cayne. The weather is also notable as we have seen significant snowfall over the last week in the north-eastern region of the US, which has been driving natural gas prices up by about 10% compared with their levels in over the past few months. Though as mentioned, crude oil prices remain weak, and the expectation remains for positive growth, particularly in the US notes Richard Cayne Meyer.
Richard Cayne at Meyer International explains that the rate cut in China has had a positive impact on markets. In terms of strong stock market performance, central banks, as always, have played a vital role. In Europe, we saw further hints of QE. European Central Bank president Mario Draghi commented on the likelihood of more asset purchases through and into early next year. In the US and the UK, markets continue to delay rate hikes into the latter part of 2015 and the early months of 2016 based on expectations that inflation will continue to fall. In China, we saw an interest-rate cut late on Friday, the first in two years. It seemed a sign of desperation that something more needed to be done to prop-up the economy. We saw a 25 basis-point (bps) cut in the deposit rate and a 40bps rate cut in the lending rate. This was enough to spur quite a substantial rally across emerging markets, particularly in Brazil (where it looks likely that President Dilma Rousseff, the victor in the recent presidential election, will appoint a market-friendly finance minister). Asia also recorded rises overnight due partially to the rate cut comments Richard Cayne.
Richard Cayne explains that the currency markets, the ongoing theme of a stronger dollar continued to be the case, with the dollar rising by about 1% over the week. Most notable was the drop of the yen toward 119, which reflected a weakening of over 15% since the summer. It has been pushed down to these levels by a snap election called by Prime Minister Shinzo Abe and a delay of further tax hikes, again, giving the idea that the yen will continue to weaken further in a bid to not only drive up domestic Japanese equity markets but stimulate some level of economic growth and inflation.
Richard Cayne also comments that the following week will be a busy one and plenty of economic data due for release, including third-quarter GDP growth for the US and Europe. Richard Cayne notes that also for release is data on consumer confidence and house prices in the US, along with consumer confidence, unemployment, and inflation data in Europe. As for Japan, we have retail sales, industrial production, and inflation data and, in China, we have leading economic indicators. It’s also worth noting that Thursday is Thanksgiving in the US, so markets will be closed that day and very quiet on Friday. On the political front, there are ongoing talks around Iranian nuclear power; it looks likely we won’t see a successful outcome of those by the deadline of today, 24 November. There is continued conflict around Russia and Ukraine. There is the Swiss referendum coming up next weekend: with key topic of discussion around proposed requirement of the central bank to hold a minimum of 20% in gold, which could create some volatility around both gold prices and the Swiss franc.
Richard Cayne originally from Montreal, Quebec Canada currently resides in Bangkok Thailand with his wife Akiko Cayne and their two young children and runs the Meyer Group of Companies www.meyerjapan.com. Prior to which he was residing in Tokyo Japan for over 15 years and is currently CEO of Asia Wealth Group Holdings Ltd a London, UK Stock Exchange listed Financial Holdings Company
Richard Cayne has been involved in wealth management in Asia for over 19 years and has assisted many High Net worth Japanese families create innovative international tax and wealth management planning solutions. The public company of which he is CEO can be seen at www.asiawealthgroup.com or stock exchange link https://www.isdx.com/Asia Wealth Group